Vietnam's domestic price of gold has been much higher than the
international price of gold – and Vietnamese authorities have
been struggling to control gold speculation as the spread between
domestic prices has widened (see chart).

Nguyen thinks the latest effort to close that gap could smash
Vietnamese gold investors.

While the SBV has been having trouble taking control, Nguyen
believes that is all about to change.

In a note to clients, he writes (emphasis added):

Banks would benefit.Commercial banks
have to close out all of their gold deposit positions by 30
June 2013 per Doc. 7019/NHNN-QLNH. Banks like ACB, who have
large gold operations, have been rushing to buy gold in the
last few months to comply. This led to the wide spread in
domestic/int’l prices. The SBV had also requested some banks to
sell gold to help stabilise the market. Some of these banks
even incurred losses as they bought back gold needed to cover
gold withdrawals. Under
the circular, the SBV would have the right to import gold from
global markets to resell to domestic banks (and authorised gold
traders). This would help banks avoid losses as
they close out positions to meet the deadline.

Investors long on gold would lose.Going
forward, banks would have no need to go out on the domestic
market to purchase gold anymore. We think thedomestic/int’l spread
willnarrow rapidly and may be eliminated
altogether. Furthermore, international gold
prices have been on a downward trend, dropping 7% since early
October 2012. Expectations that the rechanneling of investments
from gold to stocks was one of the main reasons the stock
market reacted quite positively on Friday.

Gold investors around the world have been feeling the
pain as the market has sold off since October. Now, the
Vietnamese – around 31 percent of which are gold holders – may
be about to get a taste of the same.